Babcock invests $300m in Coogee Resources

Investment bank Babcock & Brown has invested an estimated $300 million in Gordon Martin's Coogee Resources Ltd, five months after Coogee scrapped plans for a $380 million public share offer and stockmarket float.

The B&B investment will allow Coogee to continue with development of its Montara oil project in the Timor Sea and pursue its exploration program.

The deal caps a busy period for B&B, which is the preferred bidder for Alinta Ltd and has just moved to full ownership of WA's rail freight business WestNet Rail.

Coogee did not disclose the value of B&B's equity investment though chief executive Peter Hood said the unlisted company's existing shareholders, led by Mr Martin and his family, would face a smaller dilution than under the float plan.

Mr Hood said the cost of the Montara development had risen only slightly, from US$345 million to US$362 million (A$450 million), since Coogee released a prospectus last November.

As well as negotiating the equity injection, Coogee has finalised a US$270 million debt facility, which is notably higher than the US$235 million debt facility the company planned to arrange in conjunction with its stockmarket float.

It has also finalised a finance lease for the FPSO (floating, production, storage and offtake) vessel that will be used at Montara, which is on schedule to achieve first production in the third quarter of 2008.

Mr Hood said Coogee was planning to drill one exploration well this year, as part of an 11-well program over the next four years. By comparison, it had planned to drill three wells when it released its prospectus.

He added that the company would also avoid most of the costs associated with its initial public offering and stockmarket float.

It scrapped the $380 million IPO, which was jointly managed by Credit Suisse and Goldman Sachs JBWere, reportedly because institutional investors baulked at the offer price.

Mr Hood said Coogee Resources would remain an unlisted public company. It is a spin-out from Mr Martin's long established chemical business Coogee Chemicals, which is also unlisted.

Coogee Resources has been advised on its corporate activities by Azure Capital.

The full text of a company announcement is pasted below

Oil and gas explorer and producer Coogee Resources Ltd today announced it had completed several key milestones instrumental in the development of its key asset, the 100 per cent-owned Montara project located in the Timor Sea.

In addition, exploration drilling will start in November on the Company's Sea Eagle AC/P34 prospect, which is targeting p50 resources of 5.0MMbbl, as part of an 11-well exploration campaign over the next four years.

These initiatives will be funded by a combination of a secured debt facility, finance lease for the FPSO (floating, production, storage and offloading) vessel and an equity package that involves Babcock & Brown GR (Coogee) Pty Ltd ("Babcock and Brown") becoming a significant shareholder in Coogee Resources.

Coogee Resources' CEO Peter Hood said the company's corporate strategy was focussed on developing its key asset Montara into production, extracting further value from its extensive exploration acreage, and exploring options to commercialise stranded gas via a possible floating gas to liquids methanol production facility.

"In addition to these corporate activities, the development of Montara remains on schedule with the achievement of several other key milestones - including the granting of the Montara Production Licence, signing of a contract with Seadrill to secure a jack-up rig for 12 months, appointing all key staff four our development team and signing of the FPSO lease with Tanker Pacific Offshore Terminals.," Mr Hood said.

The investment by Babcock & Brown is expected to become effective in June following the satisfaction of certain conditions precedent, including approval by the Foreign Investment Review Board and completion of final debt documentation, upon which it will also appoint a representative to join the Coogee Resources Board.

Coogee Resources has received a credit approved commitment letter and term sheet for the US $270 million debt facility from the lender syndicate comprising nabCapital (a division of National Australia Bank Ltd), HVB Australia Pty Ltd (a member of the UniCredit Group) and the Royal Bank of Scotland plc.

The Montara project comprises the Montara, Skua and Swift/Swallow oil fields and has 2P reserves of 36.9 million barrels of oil. First production for Montara remains on schedule for the third quarter of 2008 and follows approval by the Coogee Resources Board in the fourth quarter 2006 of the Final Investment Decision to develop the Project.

The company's existing operations at Jabiru and Challis have 2P reserves of 5.2 million barrels of oil.

Coogee Resources has been advised on its corporate activities by Azure Capital.